Japan’s inflation last month accelerated to the fastest pace since 2008, bringing the rate closer to policy makers’ target while threatening to erode household spending power unless employers boost wages.
Prices excluding fresh food rose 1.2 percent from a year earlier, the statistics bureau said today in Tokyo, more than a median forecast of 1.1 percent in a Bloomberg News survey of economists. A separate report showed industrial output rose 0.1 percent from October, less than forecast, in a risk for projections of an acceleration in economic growth this quarter.
Friday’s data raise the stakes for employers girding for annual wage negotiations, with Prime Minister Shinzo Abe calling on them to boost salaries by more than the increase in the cost of living. Separate figures showed signs of a pickup in the labor market, with the ratio of employment offers to job seekers reaching the highest since 2007.
“The rate of price rises will allow the unions to push for higher wages,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo and former central bank official. At the same time, “they may temper their demands because of concerns about keeping jobs – so it’s difficult to see meaningful wage hikes.”
Japan is now past the halfway point to the central bank’s 2 percent inflation target, as a weaker yen and higher costs of energy spur broader price increases. The government dropped a reference to deflation in a monthly economic report this week for the first time in four years. Wages excluding bonuses and salaries fell 0.7 percent in October – a 17th straight drop.
The yen weakened after the data were released, falling to 105 against the dollar for the first time since October 2008, and was trading down 0.1 percent at 104.87 at 10:15 a.m. in Tokyo.
Bank of Japan Governor Haruhiko Kuroda, who began record easing in April, said this week core inflation is expected to hover at slightly above 1 percent through the first half of 2014. The BOJ will maintain stimulus until core inflation is stable at about 2 percent, he has said.
Abe has held a series of meetings with business and union leaders since September in a campaign to persuade companies to raise wages. Negotiations around March between trade unions and management known as “shunto” -- or the spring wage offensive – will be key for pay increases.
Honda Motor Co. Executive Vice President Tetsuo Iwamura said on Dec. 13 that the Japanese automaker will set pay based on reaching profitability targets, rather than government directives on how fast to increase compensation.
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